How To Avoid Foreclosure
Take Steps To Save Your Home
A loss of a job, medical expenses and other life-altering
occurrences can happen to anyone, causing us to fall behind in our loan
payments. If we neglect paying our credit cards it hurts our credit rating; if
we neglect our home loan payments the lender will foreclose, and repossess our
home.
We are often embarrassed to talk about our money problems, but
that approach doesn't solve anything. Put your pride on hold and get serious
about avoiding foreclosure.
Contact your lender as soon as you know your payments will be
late. Never ignore the lender's letters and do not assume you are in a hopeless
situation. Lenders do not want to foreclose, and will usually work with
you to get your account back on track.
Solutions for Temporary Problems
Reinstatement
When you are behind in your payments but can promise a lump sum to bring
payments current by a specific date.
Forbearance
You are allowed to delay payments for a short period, with the understanding
that another option will be used afterwards to bring the account current.
A Repayment Plan
If your account is past due, but you can now make payments, the lender may agree
to let you catch up by adding a portion of the past due amount to each current
monthly payment until your account is current.
Solutions for Longer-Term Problems
Mortgage Modification
If you can make your regular payment now, but cannot catch-up the past due
amount, the lender may agree to modify your mortgage. One solution is to add the
past due amount into your existing loan, financing it over a long term.
Modification might also be possible if you no longer have the
ability to make payments at the former level. The lender might modify your
mortgage to extend the length of your loan, or take other steps to reduce your
payments.
Selling Your Home
If catching up is not a possibility, the lender may agree to put foreclosure on
hold, giving you some extra time to attempt to sell your home.
Deed in Lieu of Foreclosure
The lender may allow you to give-back your property, in turn forgiving the debt.
This does negatively affect your credit record, but not as much as a
foreclosure. The lender may require that you attempt to sell the house for a
specific time period before allowing this option; the option may not be possible
if there are other liens against the home.
For FHA Loans
The lender might be able to help you receive a one-time payment from the FHA
Insurance fund. You may qualify if your loan is at least 4 months but no more
than 12 months past due and you are able to begin making full mortgage payments.
The funds must eventually be repaid. You will be asked to sign
a promissory note and HUD will place a lien on your property. The note is
interest free, and can stay attached as a lien that becomes due when you pay off
the first loan or when you sell the property.
For VA Loans
Financial counseling designed to help you avoid foreclosure is available at VA
Regional Loan Centers. Call 1-800-827-1000 and ask for the phone number of the
Loan Service Representative that can assist you.
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